Losing money to gain sales! This PD scares a group of sellers

Yesterday, Amazon's Prime Day promotion officially ended on sites in Europe, America, Japan and other regions . According to foreign media estimates, the global sales of this promotion increased by 17% over last year to $12.5 billion. Amazon said that more than 100,000 items were bought every minute, with consumer electronics and household items being the best-selling items.

From the overall sales, most sellers think that this promotion has no surprises and the performance is average. Some sellers did not achieve ideal results and said they would not participate again. However, there are also some outstanding sellers whose sales exceeded expectations, reaching 4 times or even higher growth. Among all the sites, the Japanese site performed exceptionally well this time and became the dark horse of the market.

Some sellers reviewed the situation and found that the product discount plus the event registration fee increased the order volume by about 2-3 times, but after a summary, they found that they were losing money to gain publicity. At the same time, a few sellers did not reduce prices during the promotion and even slightly increased prices to preserve profits. After this incident, sellers may have a different consideration when weighing the importance of sales, profits and ranking.

PD promotion review: Japan station becomes the dark horse

With sales sluggish in June and July, many sellers placed their hopes on Member Day, and this big promotion did give some people a shot in the arm.

Some sellers felt a surge in orders when they experienced Prime Day for the first time, and they said frankly that it felt great to have a surge in orders. One of them was overjoyed: "The PD in the UK is very good, it has increased five or six times compared to usual. I really wish every day was a shopping festival." Among the sellers who participated in Prime exclusive discounts, flash sales and other activities, most of them saw a 2-4 times increase in orders. Products with a smaller sales base even saw a 5-10 times increase. They are relatively satisfied with the results of this promotion.

But some other sellers were not so lucky. As the flash sales did not work well or even only completed half of the progress, they were quite dissatisfied with the promotion:

"PD's sales are not as good as usual, it's a tyrant."

"No one who signed up for the event did anything, and those who signed up for the event were just like that."

"Old links are not as common as in June."

"I stayed up all night and was lonely. I'm a national Prime Day runner-up."

“Prime Day LD, don’t try to cheat me out of my registration fee next year.”

Member Day lasts for two days, and sellers often regard the second day as the highlight. However, this year was a bit abnormal, and the performance of the second day of the event seemed to be worse than the previous day, and it became more intensive in the second half. One seller said that he was too disappointed with the flash sales on the second day and did not dare to stock too much goods during this year's peak season.

The effect of flash sales cannot be generalized. For example, toys are unpopular, but 3C and other categories are still hot. Compared with low-priced products, sellers clearly feel that high-priced products are more popular in big sales. Some people have observed that the products with orders that have tripled are those priced around US$50, while there is no movement for products around US$10.

This is not difficult to understand. Although low-priced products are on sale during the event, the price is not much different from usual, so consumers will not accumulate their shopping needs until the big sale. However, high-priced products can easily enjoy discounts of tens of dollars after the sale, and orders can double or even more.

An employee revealed that on the first day of the promotion, the company's brand he was responsible for received more than 10,000 orders, with sales of approximately 1.5 million US dollars. On the second day, there were also more than 8,000 orders. The company has several brands, and another brand sold more than this one, which attracted the admiration of onlookers.

However, he also admitted that this category is very competitive, with many big brands, and has requirements for supply chain and quality control, which are not possible for smaller companies. For products that sell well, his company often stock up at a cost of one or two million yuan, and a smaller batch of stock also costs hundreds of thousands. From the more information he mentioned, sellers inferred that he was talking about the smart home category.

Although most people have seen an increase in sales, they are in a dilemma after calculating their profits.

"Prime Day had a huge order volume! But I didn't make any money. I lost more than 5,000 US dollars in two days. Normally, I could still make a profit of 100 US dollars if I sold for more than 1,300 US dollars. I lost money directly during the big sale. I would never report it again if it wasn't to clear out the stock and get the money back! " lamented a seller.

There are also sellers whose sales increased by 60%, and the number of orders for some products participating in the PD discount doubled. However, the increase in advertising costs plus the 20% discount did not increase profits much, which is equivalent to losing money to gain publicity; or sellers lost money to improve rankings, but ended up losing money and out of stock, and all kinds of situations occurred frequently.

In fact, many sellers use the promotion to clear their inventory, and some losses are inevitable. The business of sellers on the European site is even more challenging. Now the euro exchange rate cannot even keep up with the US dollar. The euro-dollar exchange rate has hit a 20-year low. Coupled with the promotional discounts, many European sellers feel that their profits are meager and sales growth has become boring.

People generally reject the "0 Yuan Purchase" operation, which is a loss-making promotion. Some people bluntly say that the gross profit margin of the US site is too low, and they don't have the courage to do flash sales and member-only discounts. After all, as a small seller, the most important thing is profit data, and charity should be done less .

Therefore, most sellers will control the activities within the profit line. There are also a group of sellers who take "profitability" as the premise, neither paying to participate in the activities nor offering discounts, and even raising the price by 20% against the trend. Their attitude is very clear - "Whoever wants to do charity can do it, anyway, I don't want to be a big loser." When the platform products generally reduce prices, it is difficult for products without promotions to see sales growth, but perhaps due to the blessing of categories and products, some people have achieved a 50% or even a one- or two-fold increase in sales, and everyone is happy.

From the performance of each market, the Japanese site has become a dark horse site. Due to the time difference and shopping habits, the traffic of the Japanese site is faster and earlier than that of the American site. The number of sellers who reported that the site has experienced explosive sales has increased significantly compared with previous years. A seller with explosive sales summarized his performance: the Japanese site performed the best, the American site has a promising future, and the European site is in the process of clearing out the stock.

Sellers know how their Prime Day went, but this year’s promotion was another bumper year for the platform.

Amazon 's Prime Day growth slows

During Prime Day , Amazon sold more than 300 million items worldwide, up from about 250 million in 2021, and Prime members saved a total of $1.7 billion. This made it the largest Prime Day event in history.

Shoppers appeared more inclined to buy essentials than indulgent treats this year, with products such as Frito-Lay snack packs among the top-selling items, according to Numerator, which tracks Prime Day spending .

Numerator data shows that based on a survey of 21,306 households about their Prime Day purchases, about 58% of orders were for items under $20.

Amazon makes a “biggest ever” claim after every Prime Day, but doesn’t provide historical data for context, so here’s some additional data from the past: Amazon has disclosed total units sold since 2015.

2015 (24 hours): 34.4 million = 1.43 million per hour

2018 (36 hours): >100 million = 2.78 million pieces/hour

2019 (48 hours): >175 million = 3.65 million pieces/hour

2021 (48 hours): >250 million = 5.21 million pieces/hour

2022 (48 hours): >300 million = 6.25 million pieces/hour

The number of items sold per hour during Prime Day 2022 increased by about 20% compared to 2021. In comparison, items sold per hour increased by 31% from 2018 to 2019.

So while this year is indeed the best year ever in terms of unit volume, these numbers suggest that Prime Day was growing at a slower rate this year than in the past.

This is roughly in line with this year's forecast, suggesting that economic uncertainty is making consumers more cautious when shopping on Prime Day this year.

However, experts who work with Amazon sellers and vendors say there are some nuances this year : Some well-known brands are participating in Prime Day with deep discounts, both from Amazon sellers and third-party sellers, in categories such as apparel, supplements, toys and other consumer products.

For example, deep discounts on Apple products are evident, with the Apple Watch 7 on sale for $279 in select colors during Prime Day, down from its normal price of $399.

But overall, brand participation was "very extensive", but other sellers decided not to participate due to cost factors, or did not offer big discounts.

As for consumers, their purchasing habits have also changed. Consumers searched for specific products more often during Prime Day than in the past, and they looked for them in a targeted manner, rather than just browsing the deal page for impulse purchases. This shows that people paid attention to Prime Day this year, in part, just to save money.

As a result, with many sellers reducing discounts, consumers looking for "bargains" found that Amazon's Prime Day promotion this year did not offer much discount .

In addition to platform sales and merchant experience, another indicator for judging the effectiveness of Member Day is consumer feedback. Compared with sellers lamenting that it is not cost-effective to gain publicity at a loss, the consumer market believes that this year's discounts are not very impressive.

The discount is too small and the buyer is dissatisfied

Due to various cost issues such as advertising fees, many sellers believe that it is better to maintain profits than to sell at a loss, so the discounts offered by sellers participating in the promotion are also controlled. Even so, from the sellers' perspective, this Member Day is obviously full of big discounts, which confirms the title of "philanthropist", but consumers are not buying it, as they think the product promotion on Amazon is too weak.

Market analysts believe that this year is the second consecutive year that sellers have been very stingy with discounts. Due to rising costs, many brands' discounts are even smaller than in 2021. Some promotional products have already been iterated, and some simply offer fake discounts.

Foreign media The Verge said that many people will artificially raise prices before events such as Amazon Prime Day to make the promotion more attractive. In order to avoid falling into similar traps, consumers can use tools to view the pricing history of products. It lists several such products.

The page of a Japanese samurai sword shows that its original price is $114, but now it has a 20% discount ($22.8), so buyers can buy it for only $91.2. However, looking at its historical pricing, the product has only been sold for $114 since May 5 this year. Before that, its price was always $109, which means that the discount consumers get is less than 20%.

Another product is a small decorative stone. The product page shows that it offers a discount of up to 51% based on the price of $40.99. However, looking at the historical prices in the past three months, its retail price is mainly between $23 and $25, which means that the buyer only got a discount of $3 to $5.

However, for sellers, as long as they provide promotions within the platform rules, it is a reasonable sale and there is nothing wrong with adjusting prices appropriately.

Consumers said Prime Day was a lot like other store sales, with some items being real bargains, but not what you really want. Although many of the sales were small after scanning with price comparison tools, they considered "in stock and shipped within 2 days" to be almost as satisfying as a discount, given the damage caused by delayed shipments due to supply constraints last year. Recently, fast ocean shipping and ample inventory have given sellers this advantage.

At present, the e-commerce shopping boom driven by the epidemic has slowed down, which has also brought an impact on Amazon sellers. They cannot predict what the outcome will be, but during the Prime Day promotion, some sellers are selling at a loss, and this loss may accelerate their exit.

Costs have increased significantly, and many sellers are losing money to gain publicity

Amazon experienced its slowest revenue growth in 21 years last quarter, and its stock is down about 30 % year to date. The company has spent heavily to double its warehouse space over the past two years, just in time for slowing consumer demand. But Amazon has many other money-making businesses, such as Amazon Web Services, that can hedge against losses in its e- commerce business. But sellers on Amazon's platform are not so lucky.

"Sellers are victims of increased expectations based on the pandemic," said Andrew Lipsman, lead analyst for retail and e-commerce at Insider Intelligence. According to Insider Intelligence data, e-commerce sales soared 36% from 2019 to 2020 and increased 18% the following year. Lipsman predicts that in 2022, the growth rate will be below 10% for the first time in many years.

Amazon sellers are facing a massive increase in costs amid slowing consumer demand . On the one hand, Amazon has raised fees several times this year ; on the other hand, the e-commerce channel exploded in 2020, attracting more than 200,000 new sellers from all over the world to join Amazon, an increase of 45% from 2019.

In order to compete for limited advertising space, these new sellers have pushed up advertising fees ; in order to compete for limited customers, they still offer the lowest prices even if costs rise. Given the intensified market competition, rising advertising costs, rising input costs, and the weak e-commerce market, sellers are increasingly feeling squeezed from all sides .

Normally, sellers would stock up based on previous sales, but the sudden outbreak has changed shopping patterns to the point that sellers have become "blind."

The online shopping boom caused by the epidemic also put pressure on shipping capacity, ports were congested, and trucks were unable to pick up goods. As purchases continued to grow, shipping capacity could not keep up, and many goods could not be delivered to the United States in time. As a result, when the goods arrived, some sellers missed the peak sales season.

As inflation takes a bigger bite out of Americans' paychecks, consumer demand is starting to slow.

A seller who sells toys on Amazon said, "We now have so much backlog that the office is full of goods."

Overstocking is one of the biggest problems facing some Amazon sellers. Because there are many high-value products that consumers may no longer demand, sellers must find ways to clear them out. Clearing out inventory means paying more fees to Amazon, such as advertising fees, influencer marketing fees, and flash sales fees during Prime membership days . And clearing out inventory is not profitable.

A seller of baby products sold out his inventory in May 2020. As he was optimistic about the future performance, the seller replenished his stock significantly, but the products after replenishment were unsalable. Because there was a large amount of inventory for multiple products, the seller incurred additional storage fees of US$300,000 in the fourth quarter of last year.

Because of the high storage fees, the seller moved the products in Los Angeles to Las Vegas, where the fees were lower. In the end, the company also paid some additional labor costs for moving the products. In order to clear the inventory as quickly as possible, the baby product seller participated in this year's Prime Day promotion , but it was a loss-making business for the company.

The seller said that this year's costs have increased significantly, and participating in the Prime Day promotion did not bring any profit. For example, a product that has been promoted for half of this year has dropped from $12.99 to $10.99 during the promotion, even though the cost has increased by about 30% . In 2020, this product could earn $4 in gross profit per unit, but this year's pre-tax profit is only 84 cents.

On the one hand, Amazon's own sales are slowing down, and on the other hand, the platform is raising fees, which is certainly not beneficial to sellers . Many industry insiders believe that the e-commerce giant is passing more costs on to third-party sellers to offset inflation.

In January , Amazon raised the fulfillment fees it charges sellers ; in February, it raised storage fees ; in April, the platform added a 5% fuel and inflation surcharge. Starting in May , the company introduced an "old inventory surcharge" that increases the cost of products that have been stored in warehouses for 271 days to one year.

Amazon said in a statement that the fuel and inflation surcharges are temporary and that the other fee increases are part of an annual fee adjustment. Amazon said it is launching more programs to help sellers succeed and that its service is still 70% cheaper than other services that offer two-day delivery .

Still, the past six months have left some Amazon sellers questioning their future.

One seller in the toys category believes that it will be hard for Amazon sellers to compete with brick-and-mortar retailers like Walmart on cheaper goods. Earlier this year, Amazon changed the way it charges for shipping, and light and bulky items cost a lot more. A toy bucket that used to cost $3.54 to ship now costs twice as much , so he had to raise his price. A bucket that used to cost $11 now costs $18, while a similar product on Walmart only costs $5. As a result, his sales in this category have dropped 80%. The toy bucket is just one product, and there are many products that are affected.

After the big promotion, Amazon created the largest Prime Day event in history, but many sellers lamented that they were just losing money to gain publicity!

Amazon

Prime Day

Loss